This or That Decision Making
In the course of developing decision-making skills, we often find ourselves making comparisons. Should I choose this or that? Developing self-awareness of our emotions and of our biases helps us to be more effective in the workplace and more consistent and fair in evaluations. When we employ “this or that” thinking, we trigger something called the contrast effect.
How does the contrast effect work?
Say you had a piece of art standing alone. You would develop a certain perception of it. Now, if we put five of the all-time greatest pieces of art next to it, do you think your perception of the first piece of art would change? Sure it would, and probably not for the better. We judge something to be beautiful, expensive, or large if we have something ugly, cheap, or small in front of us to contrast with it.
Here’s another one. You order leather seats for your new car, because compared to the $60,000 price tag of the car, $3,000 seems like a small additional fee to pay. All industries that offer upgrade options understand this well. Many scientific experiments show that people are willing to walk an extra 10 minutes to save $10 on food. But those same people wouldn’t dream of walking 10 minutes to save $10 on a $1,000 suit. This is irrational. Why? Because 10 minutes is 10 minutes, and $10 is $10. If you employ straight logic, you should either walk in both cases or in neither.
The stock market is a place where this really plays with people. A person gets excited when they buy a stock that is 50 percent below its stock market high. Why is that crazy? Because it doesn’t matter what its high price was — it only matters what it’s worth today and whether it goes up or down from that point.
Why do we fall for this?
Our blind spot shows up when the changes are slow and gradual. Identity thieves have figured out that if money leaves our bank account one dollar at a time, we don’t notice it as much as if one hundred dollars is debited at once.
Another place the contrast effect shows up is when we’re making hiring decisions with applicants. It occurs when there is a particularly good or bad applicant who becomes the benchmark against which other applicants are evaluated, thereby distorting the interviewer’s evaluation of all subsequent applicants. For example, after evaluating a low caliber applicant, the interviewer may give the next applicant, who is merely average, a high rating simply because they appear significantly better than the previous applicant. This is why we advise companies to screen and select applicants based on job and applicant data that is fixed and standardized, rather than through the interview process only.
How do we avoid the contrast effect when making decisions?
Oftentimes, when we’re succumbing to the contrast effect, we’re looking at option A versus option B. To combat this, you need a standardized method of evaluation, such as the one I mentioned above in the hiring scenario.
Decide in advance a standardized way you are going to evaluate each option. Don’t just compare them. Outside of that, you need to remind yourself that you hardly ever have only two options. Whenever you find yourself faced with a decision that’s seemingly between two choices, it can be useful to consider other options, just in case you’ve fallen into the trap of the contrast effect.
Finally, if you want to be the best looking guy at the party, don’t go with your Chippendale friends. People will find you less attractive than you really are. You are better off going alone. Better yet, put the contrast effect to work for yourself and take two ugly friends.